Pennsylvania is preparing to launch online mobile gambling later this year, with 5 out of 10 casino operator applicants already approved to go live, meaning that punters will be able to wager online anytime, anywhere… with one notable exception, inside actual casinos.

According to Pennsylvania’s new gaming law, licensed casino operators in the state must prevent gamblers from being able to play while physically inside a casino using the very same technology that allows operators to know if gamblers are actually inside the state.

Two possible reasons

The strange quirk in the law, which exempts sports betting, seems to stem from two different sources. The first, say experts, is that originally the clause in the law was designed to protect tax revenues. Taxes for land-based casino play were originally higher than for betting online or via a mobile device.

In the end, however, lawmakers decided that a flat rate of 54% for both land-based and online casino betting would be preferable yet failed to remove the wording that specified the electronic fence prohibiting online betting while inside a casino.

“It probably slipped through in the final version,” Tony Ricci, chief executive of Greenwood Gaming & Entertainment Inc., the parent company of Parx Casino, told the Press of Atlantic City. “Frankly, it is quirky now when you look at it, what the point of it is. It complicates things in many ways.”

The second possibility, say some industry insiders, is that it was not an oversight at all but instead intended as a measure to protect the state’s horse racing industry.

As a concession to the struggling race track industry, when Pennsylvania agreed to legalize casino gambling back in 2004, the law included a stipulation that 10% of all slot machine revenue in the state would be directed to the Race Horse Development Trust Fund.

However, the industry stands to gain nothing from online slots play.

“You won’t want anyone placing a bet on online slots while on the casino floor, and horsemen wouldn’t be getting that cut that they have been promised,” Lindsay Slader, vice president of regulatory affairs for GeoComply, a vendor of geolocation services that online operators use to verify the exact position of online players, told the Press of Atlantic City.

While the percentage of revenue the horse racing industry could lose as a result of players gambling online while actually inside a land-based casino is said to be small, estimates put the amount of online casino revenue from players physically present in a casino at around 1% of online gross gaming revenue, the industry has stated that the gaming expansion bill Pennsylvania passed last year, allowing for truck-stop video gaming terminals, mini-casinos and online gambling, is likely to cannibalize some of the state’s land-based slots play, hitting at what many say is a lifeline for the struggling industry.

Sports betting exemption

Fortunately for bookmakers, sports betting will remain exempt from the inside casino ban. Leading sports betting operator DraftKings lobbied the Pennsylvania gaming board to ensure the exemption would remain in place, with industry lobbyist Sarah Koch writing the board last June, “DraftKings suggests dropping this requirement for sportsbook, because patrons may wish to engage in gambling on the casino floor while still monitoring sports bets placed on their mobile devices.”

The board’s response was that sports betting inside casinos would not be hampered. This comes as a relief to industry operators as a significant amount of sports betting comes from in-game bets placed while punters are actually in the casino. At the same time, the ability for gamblers to place their bets online via their mobile devices takes a significant load off of physical tellers and automated kiosks, allowing for a far larger volume of bets to be placed.

Meanwhile, the online casino gambling industry continues to grow at a break neck pace. In neighbouring New Jersey, where online betting was made legal five years ago, online gambling generated $190 million in revenue for the first eight months of 2018, a year-on-year growth rate of 16.5%, while land-based casino gaming revenue remained essentially stagnant for the same period.

Currently, online gambling accounts for 11% of total casino gaming revenue but, as it sees a higher tax rate than land-based casinos accounts for upwards of 19% of the $150 in tax revenue that New Jersey has raised so far this year.

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Richard Holmes was born in Tampa, Florida and studied computer science at Pensacola Christian College in Pensacola Florida. A devout Baptist, volunteer Sunday School teacher and online gaming fan, Richard works as a part-time systems administrator at Baptist Hospital and part-time professional blogger specializing in statistics, probability and computer science issues. He is an ardent believer in the future of artificial intelligence as a tool for transforming human society for the better, particularly in the area of health care and modern medicine. A chess player, and competitive online gamer Richard actively participates on online gaming tournaments in his free time.